On Wednesday, Westpac said it was reducing its variable home loan rates for new customers. The move makes the major the latest of Australia's Big Four Banks, following National Australia Bank (NAB) and Commonwealth Bank (CBA), to adjust its product offerings, hinting that a more borrower-friendly property market looms on the horizon.
“Interest rates are top of mind for Australians at the moment and borrowers are seeking the best deal on their home loan,” said Westpac Managing Director of Mortgages James Hutton.
Westpac's deal applies to new home loan customers. The bank dropped advertised rates on packaged variable home loans by 1.05% p.a. for owner-occupied borrower and 1.40% p.a. for investors.
The move made by Westpac comes amidst growing speculation that the nation's central bank will cut the official cash rate (OCR) at its May meeting on monetary policy. While the RBA held the OCR at 4.10% during its April meeting, recent economic indicators and commentary — much of which is centered around US President Donald Trump's ongoing tariff disputes — suggest lower rates are coming in the back half of the year.
"We've seen that markets have priced in more easing over the last couple of weeks, just given all the recent tariff news and global uncertainty," Madeline Dunk, an economist at ANZ, told Australian Broker.
Dunk pointed out that ANZ, while previously expecting only one more rate cut from the RBA in 2025, is now anticipating three more 25 basis point reductions throughout the year.
"That's just a reflection of this increasingly uncertain global environment and the clear fact that global growth is going to slow," she said.
"Just given this shifting global dynamic, and the fact that growth globally is going to slow, that [slowdown] is likely to flow through to us here in Australia as a small, open economy," Dunk continued.
But it's not just ANZ that is anticipating a slowdown.
In fact, all four of Australia's Big Four banks have forecast that the RBA will slash rates sometime this year, although market players are divided on the exact timing and by how much. Earlier this month, NAB said it was expecting the OCR to drop to as low as 2.6% by February 2026.
Yet, while rate cuts could spell good news for property shoppers and upgraders with the cash and credit already in place, rising prices and housing shortages make it difficult for first-time buyers trying to enter the market. Lower rates could also be a sign of stagflation if employment dips and inflation rise.
At present, the nation's unemployment rate stands at 4.10%, while the February Consumer Price Index (CPI) fell to 2.7%, down from 2.8% in the previous quarterly reading, moving inflation within the RBA's target range.
But other factors are currently at play, including an increasing cost of living, rising property prices and an upcoming election.
Meanwhile, Trump's tariffs continue to send shock waves through the Australian economy, even on the other side of the world.
Trump's "Liberation Day" tariffs applied a 10% levy to all Australian exports to the United States. The news of the tariffs caused markets around the world, including the Australian Stock Exchange, to plummet. Yet within days, the US president reversed course, announcing via social media that he was pausing the tariffs on some countries, including Australia, for 90 days.
And while the RBA's February rate cuts caused an initial surge of optimism in Australia's loan markets, global unpredictability has dampened general market sentiment, causing some businesses and consumers to pull back on spending.
"I think we will see rates come down faster because of all the uncertainty," said Aaron Bell, director and mortgage broker at Home Loans Village. "But really, just because of the much higher recession risk from a world that is uncertain."
